The Malachi 3:10 Money Test!

The Story

Now that you know where we came from and how we started to get out of debt, I thought it would be good to go over the steps we took to get where we are now.

First off, from June 2012 to December 2012, there was no working on getting out debt. We were paying the minimum payments on stuff, but the majority of our free money was going toward saving for our honeymoon and paying for odds and ends for our wedding. November was the honeymoon and December was Christmas and relative visiting. Add the stress of combining our bank accounts in July and trying to figure out how to budget for both our expenses and not go negative in our account, those six months were insane.

January started and we got serious about getting out of debt. My wife, Lindy, already had Dave Ramsey’s Financial Peace University Workbook and CDs. I really like the ideas he had around getting out of debt. Not a big fan of the methods, but still great things to use to help us get out of debt and I highly recommend it.

Dave breaks it down into baby steps. I’m only going to list the first two since that is the stage we are in right now.

1. Get $1000 in savings

2. Debt Snowball. Start paying off your debt starting with the lowest balance. Once that is paid off pay your next debt using the minimum payments from the past debts you have paid off.

So, we sat down and created a good budget. And by we, I mean me. I’m the money nerd. I created a budget and talked to Lindy. Showed her the awesomeness that I made and she promptly informed me that we will be needing things like clothes, toiletries, and other things single guys don’t need. So I remade the budget and we started in January.

The total amount we were in debt was around $41,000-$39,000. It’s hard to tell exactly due to pending doctor bills (Go! Go! Sleep Apnea!).

The $1,000 savings came from our income tax return. The extra $300 from that went to paying off debt. And that is how we started on this long journey.

My recommendations to people just starting the process:

1. Make a budget. You just have to. Dave Ramsey always talks about stripping down to the bare minimums and start paying everything toward debt payment. I can’t do this. I need some rewards and play money or I start feeling trapped and weighted down. Then money would become a worry for me again.

1a. If your income fluctuates, I recommend budgeting for lowest you expect to make a month. Then anything extra goes toward debt playing.

1b. Have an allowance and stick to it. This is your play money, but don’t over spend it.

1c. Mini-weekend vacations every other month are great when you get to the point where you are using 400-600 a month to pay off debt. Just take $200 of that and do some where to reward yourself, it makes it so much nicer!

2. Pay off the lowest balance first. I know paying off the highest interest rate seems like the smartest option, but the reward and confidence you get from paying off the small debt is HUGE! Plus, that means more money each month to pay off the next debt.

3. Use credit cards in your favor, not the other way around. I’ll be writing a blog post about this next month.

So that’s the framework of how we started. Next, post I’ll let you know where we stand for the month of July. I’ll be give financial updates each month!